Obama, Salazar try to strike balance with OCS strategy

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Mar. 31 -- The Obama administration announced a US Outer Continental Shelf strategy that it said would open new areas for responsible oil and gas development while protecting fisheries, tourism, and coastal areas not appropriate for such activity.

The strategy calls for oil and gas development in new areas such as the eastern Gulf of Mexico, more than 125 miles off Florida’s coast; increased exploration in frontier areas such as the Arctic Ocean and Atlantic Ocean off the Mid-Atlantic and South Atlantic states; and protecting ocean areas with other resources such as Alaska’s Bristol Bay.

US President Barack Obama presented it in the context of a broader approach that includes strong support for alternative energy technology and resource development, improves US energy security, emphasizes increased energy efficiency, and addresses global climate change and other environmental concerns.

“This is not a decision that I’ve made lightly,” Obama said Mar. 31 in a speech at Andrews Air Force Base outside Washington. US Interior Secretary Ken Salazar, White House Energy, Environment, and Global Climate Change Policy Coordinator Carol M. Browner, and others in the administration have studied the issue closely for more than a year, he noted.

“But the bottom line is this: Given our energy needs, in order to sustain economic growth, produce jobs, and keep our businesses competitive, we’re going to need to harness traditional sources of fuel even as we ramp up production of new sources of renewable, home-grown energy,” the president said.

Balanced approach
“So today, we’re announcing the expansion of offshore oil and gas exploration—but in ways that balance the need to harness domestic energy resources and the need to protect America’s natural resources,” Obama said. “Under the leadership of Secretary Salazar, we’ll employ new technologies that reduce the impact of oil exploration. We’ll protect areas vital to tourism, the environment, and our national security. And we’ll be guided not by political ideology, but by scientific evidence.”

Salazar, who introduced the president, said, “Our strategy calls for developing new areas offshore, exploring frontier areas, and protecting places that are too special to drill. By providing order and certainty to offshore exploration and development and ensuring we are drilling in the right ways and the right places, we are opening a new chapter for balanced and responsible oil and gas development here at home.”

The plan calls for expanded development and production through the gulf, including resource-rich areas in its eastern portion that are currently under a congressional moratorium, Salazar said. DOI also plans to hold two other lease sales: one off Virginia’s coast and one in Alaska’s Cook Inlet, provided there is sufficient industry interest, development can be environmentally responsible, and there is no interference with US military training needs in the Atlantic, he said.

In a teleconference with reporters following Obama’s speech, Salazar said DOI and the US Minerals Management Service will “move forward in the process to tee [an area off Virginia’s coast] up for a lease sale. We will do all the environmental analysis which needs to be considered, and look at other questions such as conflicts with military needs, shipping lanes and other uses of the sea. Our expectation is that we’ll be in a position to make that decision the latter part of 2011 or the early part of 2012.”

Virginia Gov. Robert F. McDonnell (R), who has urged Salazar to keep moving toward federal oil and gas leasing off the commonwealth’s coast, said on Mar. 31 that the Obama administration’s announcement “is good for Virginia workers, Virginia’s economy, and national security.”

The strategy’s exploration component includes seismic evaluation of the South and Mid-Atlantic OCS to determine the actual oil and gas resources there and support renewable energy planning. “We know very little about the Atlantic because the information there is 30 years old. We will embark on a seismic program to gather the information to make the right decisions,” the secretary said.

Alaska component
It also supports exploratory drilling, which could begin as early as this summer, in the Chukchi and Beaufort seas of the Arctic Ocean off Alaska to develop critical information. Salazar also ordered cancellation of Chukchi Sea leases issued under the 2007-12 OSC schedule, an apparent response after a federal court in April 2009 that environmental assessments for the Alaska portion of the program were inadequate, and suspended further leasing in the Chukchi and Beaufort seas under the current plan. “We’re looking forward to scoping under the new plan so we can find out what’s there and how to develop it responsibly,” he said. The plan also removes Bristol Bay from future leasing consideration.

Alaska’s two US senators, Republican Lisa Murkowski and Democrat Mark Begich, jointly responded that they welcomed the administration’s new plan for federal waters off the state’s coast. “Although I want to see more details, it appears President Obama has struck a careful balance between environmentally responsible development in Alaska’s outer continental shelf and conducting additional science to ensure the OCS’s other resources, such as marine mammals, are protected,” Begich said. Murkowski noted that the US Environmental Protection Agency still needs to finalize long-pending air quality permits before the exploration in the Beaufort and Chukchi seas can go forward.

“The scoping process for the 2012-17 program will provide opportunities to hear from local communities which depend on tourism, tribes whose livelihoods depend on the sea, and scientists who can tell us where the risks of development are simply too great and which areas are just too sensitive to drill,” said Salazar. He said MMS estimates there are 39-63 billion bbl of economically recoverable crude oil and 168-294 tcf of gas, representing up to 80% of the undiscovered economically recoverable oil and gas on the OCS, in the eight planning areas under consideration in the new program.

“Lease sales in the South and Mid-Atlantic will depend on the scoping hearings we hold there. When we get that information in place, we’ll determine whether additional sales will be held,” the secretary said. “The fact that we’re scoping in those areas doesn’t mean there will be oil and gas development there. We need to find out how much oil and gas is there. We also need to consult with governors and other officials.”

Eastern gulf
The strategy’s potentially single-most controversial element is its plan for leasing in the eastern gulf, which will require congressional removal of a moratorium. Salazar said, “My determination to draw the potential line for where we drill in the eastern gulf is based on where we believe the resources are. We believe most of it is more than 125 miles off the coast, and that it can be developed with sensitivity to the needs of businesses there and military training needs.”

Salazar noted that US Sen. Bill Nelson (D-Fla.) has forcefully voiced opposition to leasing off Florida’s coast for many years, and “we’ll continue to have a respectful dialogue with him.” Nelson said in a Mar. 31 response that he has spoken with Salazar and other Obama administration officials frequently. “I believe this plan shows they heeded that concern. And it ought to derail the scheme in the Florida Legislature to drill 3 miles offshore,” Nelson said.

Nelson continued, “Now I need to hear from Defense Secretary Robert M. Gates. And I want him to look me in the eye and assure me that this plan will not compromise national security by interfering with the unfettered space we have for training and testing our most sophisticated military weapons systems.”

Salazar said the OCS strategy does not include oil and gas activity off North Atlantic or West Coast states because opposition there was too great. US Rep. Lois Capps (D-Calif.) said that it was a significant improvement over the Bush administration’s program, which would have included three new lease sales off California. “This decision is a victory for California and for all of us on the south and central coasts who have been fighting to keep our coastline safe from new oil drilling,” Capps said.

Other congressional leaders also responded. “I commend Secretary Salazar for proposing a plan that makes available for leasing much of the potential offshore oil and gas resources that the federal government owns,” Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM) said. “I also commend him for indicating that additional studies will be undertaken before making a final decision on leasing in areas that might be environmentally sensitive.” The proposed plan is generally consistent with OCS legislative proposals the committee reported last summer which he hopes the Senate will address in coming weeks, he added.

Republicans were generally more critical. US Rep. Doc Hastings, the House Natural Resources Committee’s ranking minority member, said, “With this announcement, the Obama administration is attempting to pull the wool over our eyes. President Obama’s rhetoric conveys support for increasing American oil and natural gas production, while the reality is he’s proposing a plan that will close more areas to drilling than it opens and the few areas still available won’t be open for years.”

Industry groups react
Oil and gas industry associations welcomed the announcement. “We appreciate the administration’s recognition of the importance of developing our nation’s oil and natural gas resources to create jobs, generate revenues and fuel our nation’s economy,” American Petroleum Institute Pres. Jack N. Gerard said. “As we move forward, we hope that consideration can be given to other resource-rich regions, such as the Destin Dome area of the eastern gulf and areas off the Pacific Coast and Alaska. We also need to ensure that the permitting processes are handled in an expeditious way.”

Noting that preparation of MMS’s 5-year OCS plans is a long and complicated process, Independent Petroleum Association of America Pres. Barry Russell said it is important to remember that expanded offshore energy development won’t occur overnight. “Given the lengthy process, it is imperative that the administration and Congress put their plans in motion today. Otherwise, the US will continue to further its dependence on foreign resources and send more American dollars overseas,” he said.

National Ocean Industries Association Pres. Randall B. Luthi also welcomed the announcement, but warned that it’s not the finish line. “Additional rounds of review and permitting are required before any new leasing is authorized. It is, however, a step in the right direction to recognizing the need for greater domestic energy production. The key will be to actually finish the process in a timely manner,” he said.

“Due to existing infrastructure and current oil and gas production, there are areas of the OCS that can be developed relatively quickly,” Luthi continued. “It is therefore somewhat perplexing that this plan, which purports to increase our Nation’s energy security, removes so early in the process southern California, including the known Santa Barbara-Ventura basin, the Oceanside-Capistrano basin, and the Santa Maria basin and much of the eastern Gulf of Mexico, including the known Destin Dome formation.”

Luthi, who was MMS director during the latter part of the Bush administration, added that Salazar’s proposed plan “gives a ‘maybe we’ll proceed’ to an area in the Gulf of Mexico that would be extremely expensive, [and] require very deep drilling and extensive infrastructure,” adding, “It removes from discussion areas of known oil and gas and doesn’t even allow further discussion of areas where temporary structures could be used much closer to shore than the 125-mile proposal and still not be visible from the coastline.”

Salazar said, “What we are essentially doing is setting forth a 7-year plan for the OCS. There’s still a lot of work to be done with respect to the old plan as well as the new one that’s being laid on the table.”

Contact Nick Snow at nicks@pennwell.com.

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